The nematode-bacterium complex of Heterorhabditis-Photorhabdus is pathogenic to insect larvae. The bacteria undergo a form of phenotypic switching whereby the primary form, at the stationary phase of the growth cycle, makes a range of products and has the capacity to support nematode growth, whereas the secondary form does not express these phenotypes. The work described here investigated the mechanism regulating phenotypic variation by transforming the primary cells with secondary-form DNA on a low-copy-number vector and screening for colonies which did not produce the yellow pigment characteristic of primaries. Four transformants all carrying the same gene were found to loose primary-form-specific characteristics, and the gene was sequenced and identified as ner, a regulatory gene in gram-negative bacteria and their phages. Unexpectedly, inactivation of the endogenous gene in the secondaries did not cause them to revert to the primary phenotype, and the gene was expressed in the primary form as well as the secondary form during exponential but not stationary phase and deregulated in the plasmid-bearing primary form. These and other pieces of evidence indicate that the endogenous ner gene is not responsible for the secondary phenotype, but that ner, when overexpressed, can repress expression of primary phenotypes at stationary phase. Inactivation of the endogenous ner gene in the primary form affected the outer membrane protein profile. A number of outer membrane proteins displayed differential accumulation in the primary and secondary forms at stationary phase, and two of the primary-form-specific proteins were absent from the ner primary strain.